Monday, 14 May 2007
Reliance Fresh gets a Dosage
I had been thinking for quite a time whether this new phenomenon of huge companies foraying into the retail sector is good or bad. Somebody said this, and somebody said that. But still the questions remained. Is it good for the common man? Is it good for the country?
Lately, I think I have got a answer. You see, I have got some socialist tendencies, and thats why it makes it a little more difficult for me to take a stand on this situation. But now I think I am indeed in favour of this. And the reason is this :
"H.G. Narendra Babu at Bangalore’s Koramnagla and Sobti Medical Store in Delhi’s Janakpuri claim that sales have dropped by 20 per cent ever since Subhiksha opened an outlet across the road. Rohan Swaminathan has been struggling to stay afloat next to a Food World store in Bangalore for the past two years. A study by Anuradha Kalhan, professor at Mumbai’s Jai Hind College, says that sales declined in 71 per cent of small businesses and among 72 per cent of hawkers who operate in the vicinity of big malls in the city. Similar studies will show more evidence of displacement, says Prasenjit Bose, economist at the CPM’s research cell. Indeed, the first ICRIER study notes that in Latin America both domestic and foreign chains took over independent retailers and regional chains, while many local players had to shut shop in Thailand. The ability of large chains to buy in bulk and transport products more efficiently will, Gibson Vedamani, CEO of the Retailers Association of India, agrees, enable them to sell products cheaply. Subhiksha cuts out the retailers’ margin of 13 per cent on medicines by dealing directly with the wholesaler. Prices of fruits and vegetables increase by 125-150 per cent between the farmer and the consumer. It’s not just intermediaries, but inefficient transportation and wastage that push costs up. Big chains, say consultants, do this more efficiently and pass on the cost cuts to consumers. Still, Ranjan Biswas, head, retail and consumer products leader, Ernst & Young, the consultancy firm, feels small shops won’t die out entirely, as they have the advantage of being conveniently located. Besides, small shops are also fighting back. They’re joining hands to procure supplies on economical terms, sprucing up their stores and even charging big consumer companies to put their products on their shelves. Some have chosen to become franchisees of big chains (all of Reliance Fresh’s 145 outlets are franchises). “The smarter retailer will survive,” says Biswas. Similarly, ITC’s pushcarts scheme, says S. Sivakumar, chief executive of ITC’s agri-business, plans to involve existing hawkers. In fact, a micro-finance organisation Basix has approached ITC to help women headload vendors switch to pushcarts. Subramanian can’t understand what the fuss is about, since big chains are more efficient. “We did not cry when Maruti put Ambassador and Padmini out of business; why cry for these guys?” Well, the numbers involved are far bigger in this case and many of them are poor. “The idea that savings for 1.3 billion consumers are to be blocked to save 4 million traders is insane. PCOs shut down when mobile telephony expanded; can we block mobile telephony for that,” retorts Subramanian. Contends Malay Dave, CEO of the Ahmedabad-based Consumer Education and Research Centre, “The good old corner shops have been taking Indian consumers for a ride all these years.” He believes that the entry of big chains will discipline the market, bring in choice and quality and better prices."
Quite right too, couldn't disagree with it. Its time for everybody to sit up and take notice, and in haste too. The days of complacency are gone. And yes, its a harsh harsh world...